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Case arguing against an insurance company's denial of benefits to a client living with HIV

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Summary

Paul Revere Life Insurance Company issued Mark Galanty a disability income insurance policy in 1989. In 1994, Galanty presented Paul Revere Insurance with a claim for disability benefits because Galanty had to stop working as a court reporter due to pain in his hands and other medical conditions related to his HIV. After accepting his premiums for more than five years, the company claimed that Galanty was ineligible for benefits for an AIDS-related disability because he had tested positive for HIV antibodies before the policy was issued. Lambda Legal joined in representing Galanty on appeal, arguing that California law bars insurers from taking years of premium payments from a policyholder and then denying coverage when the person becomes disabled. The appellate court agreed that Paul Revere Insurance could not do this under the circumstances presented; the insurer ultimately settled and paid Galanty over $170,000 in withheld benefits.

Context

As dramatized in the John Grisham novel The Rainmaker, insurers frequently engaged in a practice referred to as "post-claim underwriting," which means selling an insurance policy, accepting premiums for years and then waiting until a claim is made to investigate the underwriting risks in an effort to find an excuse not to pay on the claim. In the disability insurance arena, this practice had a detrimental effect on people who were HIV-positive (though asymptomatic) at the time a disability insurance policy was issued because the insurer could attempt to escape its obligations under the insurance contract by pointing to the pre-existing HIV infection as a reason to deny payment of benefits. In some cases, this left people with HIV impoverished.

Lambda Legal's Impact

Working with Galanty's attorney, Lambda Legal won a significant victory for Californians living with HIV. It also affects other disability insurance policyholders who have a health condition that may not manifest symptoms until years after a policy is obtained.